Josh Van Kampen
University of Phoenix
Principles of Macroeconomics
April 16, 2012
International trade and finance
The United States is one of world’s leaders in international trade for oil, natural resources, and many other items. Various trade organizations and tax treaties have been established worldwide among various countries because the potential amount of business that can be done with various countries is growing in product and dollar amounts every day. For this very reason of products specialization that each country produces and boost this makes these trade agreements and organizations that much more valuable to the global economy and United States’ economy. This speech will tackle in depth comparative advantage, exchange rates, and trade barriers in the eyes of international trade and finance.
“Comparative Advantage” is one of the most essential items and concepts in international trade. This concept, Comparative Advantage, focus on the idea that one country is more capability, better resources, and has distinct advantages in producing one good or service in comparison to another country. The goods or services being produced has a much lower opportunity cost compared to production or manufacturing from another country. For example, South Africa has a comparative advantage the United States in mining diamonds, based on their natural resources in comparison to the United States.
Exchange Rate and Risks
Exchange rate is defined as the cost or price of a country’s currency value compared to another country currency value. The exchange rate is a direct comparison on how much one dollar of worth compared to another dollar. The majority of the world’s comparison of strength and valued is compared to the United States dollar. Risk or threats are mostly associated with exchange rates when companies decide to buy or sell (import or export)...